Accounting Cycle : Accounting cycle refers to the process of recording a business transaction in the books of accounts. This cycle begins with analysing, and recording the transactions in the journal, and concludes with the preparation of the financial statements. To Explain: The difference between external events, and internal events.

Question

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Answer 1

Question

Chapter 2, Problem 1RQ

To determine

Accounting Cycle:

Accounting cycle refers to the process of recording a business transaction in the books of accounts. This cycle begins with analysing, and recording the transactions in the journal, and concludes with the preparation of the financial statements.

To Explain: The difference between external events, and internal events.

Expert Solution

Explanation of Solution

External events are the events which involves an exchange transaction between the two parties, which is between a company, and another entity. Whereas, internal events are the events which does not involve any exchange transaction but such events affect the financial position of the company.
Examples of external events are as follows:

1. a) Borrowing of cash from bank
2. b) Purchase of inventory
3. c) Sale to a customer

Examples of internal events are as follows:

1. a) Accrual of salary expense
2. b) Depreciation expense
3. c) Expiry of prepaid rent

To determine

External events:

External events are the events which involves an exchange transaction between the two parties, which is between a company, and another entity. Examples of external transactions include borrowing of cash from bank, purchase of inventory, and sale to a customer.

To Identify: Whether the supplies purchased by a company from a local vendor would be classified as an external or internal transaction.

Expert Solution

Answer to Problem 1RQ

The supplies purchased by a company from a local vendor would be classified as an external transaction.

Explanation of Solution

When the supplies are purchased by a company from a local vendor, it means that a transaction is being taken place between the two parties, which is between a company, and a local vendor.

Conclusion

Hence, the supplies purchased by a company from a local vendor would be classified as an external transaction.

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If an oil rig was built in the sea, the cost to be capitalised is likely to include the cost of constructing the asset and the present value of the cost of dismantling it. If the asset cost $10 million to construct, and would cost $4 million to remove in 20 years, then the present value of this dismantling cost must be calculated. If interest rates were 5%, the present value of the dismantling costs are calculated as follows: $4 million x 1/1.0520 = $1,507,558 The total to be capitalised would be $10 million + $1,507,558 = $11,507,558. This would be depreciated over 20 years, so 11,507,558 x 1/20 = $575,378 per year. Each year, the liability would be increased by the interest rate of 5%. In year 1 this would mean the liability increases by $75,378 (making the year end liability $1,582,936). This increase is taken to the finance costs in the statement of profit or loss.

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Answer 2

Question

Chapter 2, Problem 1RQ

To determine

Accounting Cycle:

Accounting cycle refers to the process of recording a business transaction in the books of accounts. This cycle begins with analysing, and recording the transactions in the journal, and concludes with the preparation of the financial statements.

To Explain: The difference between external events, and internal events.

Expert Solution

Explanation of Solution

External events are the events which involves an exchange transaction between the two parties, which is between a company, and another entity. Whereas, internal events are the events which does not involve any exchange transaction but such events affect the financial position of the company.
Examples of external events are as follows:

1. a) Borrowing of cash from bank
2. b) Purchase of inventory
3. c) Sale to a customer

Examples of internal events are as follows:

1. a) Accrual of salary expense
2. b) Depreciation expense
3. c) Expiry of prepaid rent

To determine

External events:

External events are the events which involves an exchange transaction between the two parties, which is between a company, and another entity. Examples of external transactions include borrowing of cash from bank, purchase of inventory, and sale to a customer.

To Identify: Whether the supplies purchased by a company from a local vendor would be classified as an external or internal transaction.

Expert Solution

Answer to Problem 1RQ

The supplies purchased by a company from a local vendor would be classified as an external transaction.

Explanation of Solution

When the supplies are purchased by a company from a local vendor, it means that a transaction is being taken place between the two parties, which is between a company, and a local vendor.

Conclusion

Hence, the supplies purchased by a company from a local vendor would be classified as an external transaction.

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Answer 3

Question

Chapter 2, Problem 1RQ

To determine

Accounting Cycle:

Accounting cycle refers to the process of recording a business transaction in the books of accounts. This cycle begins with analysing, and recording the transactions in the journal, and concludes with the preparation of the financial statements.

To Explain: The difference between external events, and internal events.

Expert Solution

Explanation of Solution

External events are the events which involves an exchange transaction between the two parties, which is between a company, and another entity. Whereas, internal events are the events which does not involve any exchange transaction but such events affect the financial position of the company.
Examples of external events are as follows:

1. a) Borrowing of cash from bank
2. b) Purchase of inventory
3. c) Sale to a customer

Examples of internal events are as follows:

1. a) Accrual of salary expense
2. b) Depreciation expense
3. c) Expiry of prepaid rent

To determine

External events:

External events are the events which involves an exchange transaction between the two parties, which is between a company, and another entity. Examples of external transactions include borrowing of cash from bank, purchase of inventory, and sale to a customer.

To Identify: Whether the supplies purchased by a company from a local vendor would be classified as an external or internal transaction.

Expert Solution

Answer to Problem 1RQ

The supplies purchased by a company from a local vendor would be classified as an external transaction.

Explanation of Solution

When the supplies are purchased by a company from a local vendor, it means that a transaction is being taken place between the two parties, which is between a company, and a local vendor.

Conclusion

Hence, the supplies purchased by a company from a local vendor would be classified as an external transaction.

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Answer 4

Question

Chapter 2, Problem 1RQ

To determine

Accounting Cycle:

Accounting cycle refers to the process of recording a business transaction in the books of accounts. This cycle begins with analysing, and recording the transactions in the journal, and concludes with the preparation of the financial statements.

To Explain: The difference between external events, and internal events.

Expert Solution

Explanation of Solution

External events are the events which involves an exchange transaction between the two parties, which is between a company, and another entity. Whereas, internal events are the events which does not involve any exchange transaction but such events affect the financial position of the company.
Examples of external events are as follows:

1. a) Borrowing of cash from bank
2. b) Purchase of inventory
3. c) Sale to a customer

Examples of internal events are as follows:

1. a) Accrual of salary expense
2. b) Depreciation expense
3. c) Expiry of prepaid rent

To determine

External events:

External events are the events which involves an exchange transaction between the two parties, which is between a company, and another entity. Examples of external transactions include borrowing of cash from bank, purchase of inventory, and sale to a customer.

To Identify: Whether the supplies purchased by a company from a local vendor would be classified as an external or internal transaction.

Expert Solution

Answer to Problem 1RQ

The supplies purchased by a company from a local vendor would be classified as an external transaction.

Explanation of Solution

When the supplies are purchased by a company from a local vendor, it means that a transaction is being taken place between the two parties, which is between a company, and a local vendor.

Conclusion

Hence, the supplies purchased by a company from a local vendor would be classified as an external transaction.

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Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Answer 5

Chapter 2, Problem 1RQ

To determine

Accounting Cycle:

Accounting cycle refers to the process of recording a business transaction in the books of accounts. This cycle begins with analysing, and recording the transactions in the journal, and concludes with the preparation of the financial statements.

To Explain: The difference between external events, and internal events.

Expert Solution

Explanation of Solution

External events are the events which involves an exchange transaction between the two parties, which is between a company, and another entity. Whereas, internal events are the events which does not involve any exchange transaction but such events affect the financial position of the company.
Examples of external events are as follows:

1. a) Borrowing of cash from bank
2. b) Purchase of inventory
3. c) Sale to a customer

Examples of internal events are as follows:

1. a) Accrual of salary expense
2. b) Depreciation expense
3. c) Expiry of prepaid rent

To determine

External events:

External events are the events which involves an exchange transaction between the two parties, which is between a company, and another entity. Examples of external transactions include borrowing of cash from bank, purchase of inventory, and sale to a customer.

To Identify: Whether the supplies purchased by a company from a local vendor would be classified as an external or internal transaction.

Expert Solution

Answer to Problem 1RQ

The supplies purchased by a company from a local vendor would be classified as an external transaction.

Explanation of Solution

When the supplies are purchased by a company from a local vendor, it means that a transaction is being taken place between the two parties, which is between a company, and a local vendor.

Conclusion

Hence, the supplies purchased by a company from a local vendor would be classified as an external transaction.

Answer 6

Chapter 2, Problem 1RQ

To determine

Accounting Cycle:

Accounting cycle refers to the process of recording a business transaction in the books of accounts. This cycle begins with analysing, and recording the transactions in the journal, and concludes with the preparation of the financial statements.

To Explain: The difference between external events, and internal events.

Expert Solution

Explanation of Solution

External events are the events which involves an exchange transaction between the two parties, which is between a company, and another entity. Whereas, internal events are the events which does not involve any exchange transaction but such events affect the financial position of the company.
Examples of external events are as follows:

1. a) Borrowing of cash from bank
2. b) Purchase of inventory
3. c) Sale to a customer

Examples of internal events are as follows:

1. a) Accrual of salary expense
2. b) Depreciation expense
3. c) Expiry of prepaid rent

Answer 7

Chapter 2, Problem 1RQ

To determine

Accounting Cycle:

Accounting cycle refers to the process of recording a business transaction in the books of accounts. This cycle begins with analysing, and recording the transactions in the journal, and concludes with the preparation of the financial statements.

To Explain: The difference between external events, and internal events.

Answer 8

Expert Solution

Explanation of Solution

External events are the events which involves an exchange transaction between the two parties, which is between a company, and another entity. Whereas, internal events are the events which does not involve any exchange transaction but such events affect the financial position of the company.
Examples of external events are as follows:

1. a) Borrowing of cash from bank
2. b) Purchase of inventory
3. c) Sale to a customer

Examples of internal events are as follows:

1. a) Accrual of salary expense
2. b) Depreciation expense
3. c) Expiry of prepaid rent

Answer 9

Expert Solution

Answer 10

Expert Solution

Answer 11

Expert Solution

Answer 12

To determine

External events:

External events are the events which involves an exchange transaction between the two parties, which is between a company, and another entity. Examples of external transactions include borrowing of cash from bank, purchase of inventory, and sale to a customer.

To Identify: Whether the supplies purchased by a company from a local vendor would be classified as an external or internal transaction.

Expert Solution

Answer to Problem 1RQ

The supplies purchased by a company from a local vendor would be classified as an external transaction.

Explanation of Solution

When the supplies are purchased by a company from a local vendor, it means that a transaction is being taken place between the two parties, which is between a company, and a local vendor.

Conclusion

Hence, the supplies purchased by a company from a local vendor would be classified as an external transaction.

Answer 13

To determine

External events:

External events are the events which involves an exchange transaction between the two parties, which is between a company, and another entity. Examples of external transactions include borrowing of cash from bank, purchase of inventory, and sale to a customer.

To Identify: Whether the supplies purchased by a company from a local vendor would be classified as an external or internal transaction.

Answer 14

Expert Solution

Answer to Problem 1RQ

The supplies purchased by a company from a local vendor would be classified as an external transaction.

Answer 15

Expert Solution

Answer 16

Expert Solution

Answer 17

Expert Solution

Answer 18

Explanation of Solution

When the supplies are purchased by a company from a local vendor, it means that a transaction is being taken place between the two parties, which is between a company, and a local vendor.